The national health insurance program underwent a major reform at the start of fiscal 2018 that saw prefectures, rather than municipalities, begin managing the deficit-ridden system to improve its financial base.

The program, called kokumin kenkō hoken in Japanese, covers the self-employed, pensioners, nonregular workers and other people ineligible to join employment-based health insurance programs. It is the last stronghold of Japan’s universal health insurance system.

As of the end of fiscal 2016, for which the latest data are available, some 30.13 million people were covered by the program. But since their average income is low, the system cannot cover its medical costs based on premiums paid by them alone.

In fiscal 2016 ended March 2017, the program incurred a deficit of ¥146.8 billion on a real-term basis, excluding provisions from municipal governments’ general accounts.

Under the reform, the central government decided to transfer management of the insurance program from the municipal governments to the prefectural governments and increase financial support for the program, based on a legal revision in 2015.

But the municipal governments continue to determine their insurance premiums using the standard rates set by the prefectural governments.

Premiums have fallen in many municipalities this year as a result of the reform, which caused a new calculation system to be adopted that is more responsive to the income levels of the insured. According to the Health, Labor and Welfare Ministry, premiums in fiscal 2016 dropped in 828 cities, wards, towns and villages, or 54 percent of all municipalities.

At the same time, disparities in premiums have widened among municipalities in the same prefecture, reflecting differences in income and number of members. The biggest disparity, 3.5 times, was found in Okinawa.

Although the ministry is calling for the unification of premiums in each prefecture, “unification anytime soon may be difficult,” an official said.

The central government doubled its annual financial support for the national health insurance program to ¥340 billion beginning in fiscal 2018 as part of the reform.

The program’s real deficit is therefore expected to fall. The ministry official, however, said its financial standing appears to have improved, though it remains deficit-ridden.

The use of taxpayer money for the program is expected to increase further as the number of aged members, who tend to go to hospitals more frequently, is only set to grow. The release of expensive drugs for patients with special requirements will also likely add to the medical expenses covered by the program.

The ¥340 billion in annual financial support for the program is being financed by consumption tax hikes and increased premium payments from corporate health insurance societies, which cover the employees of large companies. In other words, securing new financial sources will be difficult when additional government spending on the program becomes necessary.

Down-to-earth efforts to curb medical expenditures, such as attempts to improve public health through awareness campaigns, are becoming increasingly important to the central government, analysts said.